Live Long and Prosper

Creating Trusts with Heart and Soul

BY ROMAR CARL DIRECTOR, WEALTH IMPACT PLANNING

Live Long and Prosper

Creating Trusts with Heart and Soul

BY ROMAR CARL DIRECTOR, WEALTH IMPACT PLANNING

In Star Trek, a greeting or farewell of the Vulcan people, Live Long and Prosper,
expresses the wish or desire for another to have a long and prosperous life. The Filipino
Most trust grantors
greeting, Mabuhay, can also be roughly translated as live long and prosper. (It literally
means live, but the expression is meant to convey a wish for a long and prosperous life.) In desire that the
Shakespeares Romeo and Juliet, Romeo says to Balthasar, Live, and be prosperous, and beneficiaries of
farewell good fellow.
the trusts they
These good wishes are implicit in many trust documents. Most trust grantors desire that the
beneficiaries of the trusts they create will have long, healthy, prosperous and happy lives. create will have
Most trusts are established to give beneficiaries a hand up and as a tool to enhance their lives long, healthy,
without taking away a beneficiarys individual ambition for personal achievement.
prosperous and
Unfortunately, since the establishment of a trust is quite often driven by tax strategy, reading a
trust document can be confusing. Language used often parrots tax code provisions in order
happy lives.
to obtain the desired tax result. Trust documents are often filled with legalese and boilerplate
language. Often the trust creators name is found only on the front page and signature
pages. Beneficiary names may not even be specified. Many trust documents are sterile and
impersonal. Rarely do trust documents demonstrate the hopes and dreams of the grantor.
Perhaps we should consider creating trusts that have heart and soul.

There is a new style of trust emerging in the U.S. which clearly articulates a grantors vision
and purpose. In some circles, such a trust is being called a Purposeful Trust. In this paper,
well refer to it as a trust with heart and soul. Whatever you call it, such a trust focuses on a
clients stated objectives and not objectives that have been assumed on behalf of the client.

A trust that focuses only on financial and tax matters can be myopic and can cause a grantor
to lose sight of the power of his or her gift to influence, guide and direct beneficiaries to a
long and prosperous life. All too often, people view estate planning as a process they endure
rather than enjoy. They see it as a responsibility rather than an opportunity.1 The reality is that
it is both a responsibility and an opportunity. Creating a trust with heart and soul will focus on
the opportunities created and may make the estate planning process enjoyable.

A trust with heart and soul should read as if the grantor is talking to the beneficiaries. It should
be personal, share the grantors deepest desires, goals and values, and explain whats behind

1
Values Based Estate Planning, Scott C. Fithian, page 48, Copyright 2000.

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 Live Long and Prosper

specific terms and provisions. It should clearly communicate the grantors desire to help the
trust beneficiaries have a long and prosperous life.
A trust with heart
and soul should HELP BENEFICIARIES UNDERSTAND YOUR INTENT
read as if the With no clear statement of intent, the trust becomes a ship with a compass but no location
grantor is talking to of true North.2 Beneficiaries of a trust that has heart and soul will not wonder why the
grantor included specific trust terms, as they should be explained. They will not be guessing
the beneficiaries. as to the overall purpose of the trust, as it should be clearly stated. By creating a trust
It should be with heart and soul you may avoid some of the types of circumstances I ran into when I
was serving as a Trust Officer. As an example, one trust I served was set up to assist the
personal, share the
trustors grandchildren in gaining an education. The trustor provided in the trust that after
grantors deepest age 32, a beneficiary could no longer request distributions from the trust for educational
desires, goals and purposes. The grandson of the trustor he asked me, Why do you think grandpa put
that provision in the trust? While you and I could guess at the reasoning behind such
values, and explain a provision, the bottom line was that there was no way I could know for sure why that
whats behind provision was there. Imagine how much easier it would have been if the trust had clearly
stated the rationale behind cutting off funds for education at age 32.
specific terms and
Beneficiaries of a trust with heart and soul may be less likely to be confused by the trust
provisions. legalese, as the meaning can be written in plain English and examples may be provided for
clarity. A trust with heart and soul becomes an opportunity for grantors to tell beneficiaries
how much they love them and are proud of them, and to impart wisdom and counsel.
Such a trust can be of great benefit to both the trustees and beneficiaries when it comes to
making decisions around distributions from the trust.

COMMUNICATION MATTERS
In The Purposeful Trust Handbook3 John John A Warnick tells the story of The letter
from Dons Grandfather.

 this story, as Don grows up he is very close to his grandfather. His grandfather
In
is always there for important events in Dons life. He was there for ball games, high
school graduation and college graduation. When Don found the girl he wanted to
marry he took her by to meet his grandfather and felt he received his approval.


Life drew Don away from his home town and visits home never seemed long
enough. After many years Don decided to quit his successful business career and
move back home to be closer to his parents and grandparents and to start his own
business. Shortly thereafter, his grandmother passed away and his parents decided

2
 he Use and Abuse of Incentives Trusts: Improvements and Alternatives, Jon J. Gallo, Eileen Gallo, Ph.D.,
T
James Grubman, Ph.D., page 26 Presented at the 2011 Heckerling Institute for Estate Planning.

3
The Purposeful Trust Handbook, John A. Warnick & The Purposeful Planning Institute, Copyright Mid 2013.

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 Live Long and Prosper

to buy a house in Arizona and winter there. For the next five or six years, every
winter Don was given the responsibility to keep a close eye on him.
Who wouldnt love
 day when Don was out of town, his grandfather passed away. Don was
On
to receive such a
surprised to find out he was appointed as executor. Don had Doris (his secretary)
letter? A letter that box up his grandfathers personal belongings to later be distributed among the
perhaps told of family. After she had completed this task she said to Don, By the way, I dont think
I ever told you that I found a letter addressed to you, in a sealed envelope, in your
special times that grandfathers writing. Would you like to see it?
had been shared 
Dons heart leapt with excitement. There had been no chance for a final good-bye.
together and No moment to stand by his death bed and squeeze his hand and listen for a final
expression of love or an affirmation that he was proud of how Don had turned out.
lessons learned.
Don couldnt wait to read this letter. His mind was racing with possible themes he
might have addressed in this final written message. Don came back to earth and
realized his secretary was still standing in his office.

Doris, he exclaimed, bring that letter to me right away. Doris didnt move. She
just sat there staring at his obvious excitement. She then said, Im sorry Don, but
there was no letter. I know youll forgive me. I just needed to make a point. But
how about you, Boss? Have you written a letter to your children? Will your future
grandchildren receive a letter from you?

Out of genuine friendship, Doris had intentionally misled Don to try to get him to feel
firsthand the power of such a letter. Don was very disappointed and was overwhelmed
by the ache for the letter that wasnt there, but ultimately understood Doris point. Who
wouldnt love to receive such a letter? A letter that perhaps told of special times that had
been shared together and lessons learned. A letter that perhaps noted all the things the
departed admired in the survivor, and talents observed. A letter that maybe expressed the
gratitude felt for having had the opportunity to share this journey together.

How many people write letters to those they leave behind passing on ethical values and
ideals and letting them know how proud of them they are? If you ask someone who
has received such a letter, What is the most meaningful possession you received from
someone close to you? that person most likely would say, The letter I found addressed
to me in my fathers safe deposit box, or The letter my grandmother handed me a few
years before she died. In a trust with heart and soul you can incorporate this valuable gift
into the trust language.

A trust with heart and soul is an opportunity to leave a final communication with
beneficiaries in a way it will be remembered and cherished for their lifetimes. It is an
opportunity for the grantor to give final advice and impart wisdom gained throughout
their lifetime. While a trust with a heart and soul can also accomplish great tax savings,
it should be clear to the beneficiaries that tax savings were not the only goal of the trust.
It should also be clear that the trust was not an attempt to control the beneficiary from

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 Live Long and Prosper
Beneficiaries of SAMPLE: Statement of Intent
a trust that has John, Mary and Sam, because we
love you so much, we have created
heart and soul
these trusts to encourage you and your
will not wonder descendants to be productive and
responsible, and to encourage you to
why the grantor
conduct yourselves with moral integrity.
included specific Therefore, we intend that the trust
trust terms, as assets be used to assist you in making a
constructive contribution to and assume
they should be a positive role in society. We intend that
explained. the trusts we are creating here will likely
be perpetual trusts and that the trust
estate will not be inordinately depleted.
The trusts are not intended to benefit
you all equally. Some of you may receive
assistance early in life to overcome a
disability or hardship while others of you
may not receive trust distributions until
later in life. Its quite possible that you
will be happy, healthy, well adjusted,
self-supporting and productive, and not
receive any distributions from any trust
created hereunder.
We feel it is important for you to realize
that all choices have consequences,
both good and bad. Because of that,
we instruct the trustees to allow you
to experience the consequences of
your decisions and not always be
there to bail you out when those
consequences are challenging. If,
4
however, the trustees determine that you
fully understand and will not repeat the
poor decision that has landed you in the
challenging circumstance, the trustees
may exercise their discretion to assist
you and help, if possible, to alleviate
those consequences. Since actions
speak louder than words, it will become
clear to the trustees, if you repeatedly
make choices that result in unfavorable
consequences, that you have not learned
from those experiences. In such cases
the trustees will be less likely to lend
a helping hand and let you learn from
experience.
We intend the trusts to be there to give
you a hand up in life, to help you start a
business, buy a home or just provide a
little extra when bills seem to be higher
than expected or normal. We dont
expect the trusts to be a crutch that you
lean on. We want you to rely on yourself
and loved ones and turn to the trust only
when really needed.
We hope these trusts will bless our
posterity for generations to come.
However, our trustees have full discretion
to deplete the trust assets in pursuit
of fulfilling the overall trust purposes
and our goals as outlined further in this
agreement.
the grave. Instead, it was the generosity and love of the grantor and their desire to create
a vehicle that would enhance the beneficiarys life that was the driving force behind the
A trust with heart
creation of the trust.
and soul is an
INCLUSION OF A LIST OF DESIRED BEHAVIORS opportunity to
A trust with heart and soul may want to include a list of the desired behaviors the trustors leave this final
would like beneficiaries to exhibit. We are not talking about creating an incentive trust here by
the inclusion of this list, as it is becoming more apparent that incentive trusts are more likely
communication
to thwart development of motivation than support it.4 However, a list of desired behaviors can with beneficiaries
be helpful in a trust with heart and soul which relies on the judgment of the trustee. Such a list
in a way it will be
can help the trustee and the beneficiary clearly understand what is important to the trustors
and provide light on the constraints and guidelines outlined by the trust creator. remembered and
cherished for their
lifetimes.
SAMPLE: Encouragement of Desired Behaviors

We intend that distributions be made in a manner that encourages the recipient to

exhibit or accomplish one or more of the following desired behaviors:

a. P
 ursue training and education at least through an undergraduate college degree
or equivalent or in a viable trade or the arts;

b. Pursue gainful employment with a view toward being financially self-sufficient;

c. Be a law-abiding member of society;

d. B
 e a productive member of family, community and society by making meaningful
and positive contributions to your family, community and society in general;
e. A
 chieve financial literacy, handle money in an intelligent and practical manner and
avoid wasteful spending;

f. Act with empathy, thoughtfulness, kindness and consideration towards others;

g. Develop healthy and meaningful relationships; and

h. Make contributions to charity.

We understand that a recipients age, health, ability and other circumstances will
affect whether he or she can accomplish one or more of the desired behaviors, and
such should be considered in construing and applying the foregoing. We consider full-
time parents to be productive members of society and gainfully employed, and dont

4
 he Use and Abuse of Incentive Trust: Improvements and Alternatives, Jon J. Gallo, Eileen Gallo, Ph.D.,
T
James Grubman, Ph.D., Page 11-5, Presented at the 2011 Heckerling Institute for Estate Planning.

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 Live Long and Prosper

...a list of desired SAMPLE: Encouragement of Desired Behaviors (continued)

behaviors can be intend you or your children to be discouraged from choosing to raise a family as your
sole occupation.
helpful in a trust
We dont expect you or your children to necessarily exhibit or accomplish all of the
with heart and soul
desired behaviors, and recognize that some desired behaviors may even conflict
which relies on the with others. We hope and intend that the trust property will be used to reward and
enhance your quality of life as you accomplish or are working toward accomplishing
judgment of the
one or more of the desired behaviors, and that it will encourage and assist you to
trustee. exhibit and accomplish these behaviors.

On the other hand, we also hope and intend that the trust property will not be
distributed to you or your children if you are engaging in actions and behaviors
unbecoming of an upstanding citizen. Some such behaviors unbecoming of an
upstanding citizen are:
I. Illegal or dangerous substance abuse;

II. Violent or harmful acts or threats to commit violent or harmful acts;

III. Addiction or dependency on any substance not under a doctors supervision,

or addiction to gambling; and

IV. Incarceration for any crime.

We hope to avoid the use of the trust property in a manner that might impair the
desire of any of you, our beloved descendants, to be an upstanding citizen and to
act as such. Therefore, we dont intend that any of you will have an expectancy of
any kind from the trust that could contribute to, allow or accommodate behavior
unbecoming of an upstanding citizen. And we desire that the provisions of this
agreement will encourage, and not inhibit, the desire of all of you to become morally
upright members of society.

NOTE: U.S. Bank and its representatives do not provide tax or legal advice. Each
individuals tax and financial situation is unique. Individuals should consult their tax
and/or legal advisor for advice and information concerning their particular situation.

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WHATS IN A NAME?
There is a powerful symbolic opportunity in naming your trust. One of the keys of a trust with ...create emotional
heart and soul is the name chosen for the trust. John A. Warnick, pioneer of the Purposeful energy that can
Trust concept, suggests that during the lifetime of a trust beneficiary there are 300 or more
opportunities to connect and remind them of the purpose and intent of the trust. Each time act as the catalyst
the beneficiaries receive a statement, the trusts name will be there to remind them of the in engendering
primary purpose behind its creation. So, instead of naming a trust based on the tax strategy
a deep sense
being employed (such as, Joness SIDGT, or Smiths GRAT#1 or GST Exempt Trust, or
Reverse Marital QTIP), consider the long term purpose of the trust and consider naming it of gratitude in a
accordingly (such as, The John McCormick Educational and Lifetime Enhancement Trust,
beneficiary.
or The Elton Family Unification Trust). Be creative, and consider the primary purpose of
the trust and how to express that purpose in the trust title. If you want to have a subtitle to
assist administrators and advisors, then add, Marital Trust or Bypass Trust, as examples.

ENCOURAGING GRATITUDE
Presumably, one would be hard pressed to find a grantor that wants to inure in his/her
beneficiaries a sense of entitlement. In fact, how to prevent this is one of the most common
questions financial advisors, attorneys and CPAs will get from someone anticipating making
a substantial gift. If a beneficiary has a deep sense of gratitude, it can go a long way towards
keeping him or her out of the entitlement trap. This is because true gratitude stems from
the willingness to recognize what is unearned or undeserved.5 The grateful beneficiary
acknowledges that he has received a gift, given out of the loving generosity of the benefactor,
and to which he holds no right of claim. The grateful beneficiary recognizes that being born
into the right family does not give her a right to that which she did not earn.

When a grantor creates a trust with heart and soul and truly gives of himself in the language
and expressions used in the trust document, when he pours his own life essence into the
trust, he attempts to create emotional energy that can act as the catalyst in engendering a
deep sense of gratitude in a beneficiary. This gratitude may help to keep the beneficiaries
out of the entitlement trap and guide them on their way to fulfilling the grantors farewell wish
to live long and prosper.

Romar Carl earned a J.D. cum laude from J. Reuben Clark Law School at Brigham Young
University, an LL.M. in taxation from the University of Washington and a Bachelors degree in
Finance from the University of Utah. Mr. Carl is also a Certified Financial Planner.

5
Thanks!, How Practicing Gratitude Can Make You Happier, Robert A. Emmons, Ph.D., page 99, 2007.